Cyber Insurance ‘Profitable,’ but Could Be Credit Negative for Insurers

Cyber security studies confirmed a significant increase in data breaches last year and, now, property/casualty (P&C) insurers are scouring for ways to protect their policyholders in the likelihood cyber attacks occur in 2018. But according to Fitch Ratings, cyber insurance could be credit negative for insurers in the demanding market.

The Equifax breach and Wannacry and NotPetya ransomware attacks are among the more severe cyber attacks that occurred in 2017. With the number of U.S. data breaches increasing nearly 45% last year, as reported by the Identity Theft Resource Center and Cyber Scout, insurers are continually challenged when it comes to underwriting and actuarially pricing these exposures.

"Newer market entrants may be more vulnerable to underpricing risks and exposures to large future losses as they may lack the unique underwriting and claims expertise needed for cyber insurance," Fitch reported on Feb. 7.

Although described by Fitch as a "profitable niche," cyber insurance demand is expected to remain strong this year, fueled by companies' concerns as well as increased government regulations. As statutory financial data becomes available in the coming months, Fitch plans to update its report on cyber insurance 2017 market share and performance.

—Andrew Michaels, editorial associate